Fujikura's Shocking Upward Revision: A Catalyst for the Market to Reassess the Reality of AI Demand
Introduction
Fujikura has issued a significantly strong upward revision.
In conclusion, this upward revision is not merely a positive surprise in the numbers.
It is an event where the company has responded with figures to the anxieties the market held after the May earnings report, such as:
"Is AI data center demand truly sustainable?"
"Will supply constraints arise due to hydrogen shortages?"
"Will the company's plan fall short of market expectations?"
The company has addressed these concerns with concrete numbers.
The revision to the operating profit forecast is particularly impactful.
The previous forecast was 211 billion yen.
After this revision, it is 310 billion yen.
The increase is 99 billion yen.
The revision rate is +46.9%.
This is quite substantial.
Simply put, the company has raised the profit forecast it issued just one month ago by nearly 50%.
Moreover, this upward revision is not merely due to exchange rates or one-time gains.
The reasons cited by the company are primarily the following three:
• Project orders for optical component products for hyperscalers
• Price increases
• Mitigation of the impact of hydrogen shortages
These three points are extremely important.
This is because they quite directly negate the reasons why Fujikura's stock was sold off after the May earnings report.
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Reasons why Fujikura was sold off in May
First, I want to clarify why Fujikura was sold off in May.
Fujikura was not sold because its performance was poor.
On the contrary, its recent performance was strong.
Even so, the stock price collapsed because market expectations were too high.
Fujikura was being bought aggressively as a core stock for AI data centers, optical fibers, optical cables, and electric wires.
Because of this, the market was expecting a very strong company plan.
However, the company's plan as of May appeared conservative to investors.
Furthermore, concerns were raised regarding the procurement of certain raw materials, such as hydrogen, in response to the rapid increase in optical cable production.
In other words, this is how the market viewed it.
"Demand might be strong. But if supply cannot keep up, won't profits fail to grow as much as expected?"
This anxiety was the background for the stock price decline.
This is the important part.
Fujikura was not sold because AI demand was weak.
Rather, it was sold because demand was so strong that supply constraints were feared.
What has changed with this upward revision?
With this upward revision, the market's perspective will change significantly.
The biggest point is the reason for the upward revision.
Project orders for optical component products for hyperscalers.
This phrase is extremely significant.
Hyperscalers refer to the group of companies that invest in ultra-large-scale cloud and AI infrastructure.
In other words, demand for AI data centers is not just mere expectation, but is coming in as actual orders.
Furthermore, selling prices have increased.
This indicates that Fujikura is not simply increasing its volume.
Not only is demand strong, but they are also able to command higher prices.
This means it is a structure where profit margins are likely to rise.
And the easing of the hydrogen shortage impact.
This was one of the risks the market disliked the most after the May earnings announcement.
Even if there is demand, it is meaningless if you cannot produce the goods.
This time, that supply constraint risk has receded to a certain extent.
With these three factors combined, this upward revision is quite strong in content.
The impact seen in the numbers
The full-year forecast revision is summarized as follows.
Item Previous Forecast Revised Forecast Change Rate Net Sales 1.243 trillion yen 1.462 trillion yen +17.6% Operating Profit 211 billion yen 310 billion yen +46.9% Ordinary Profit 218 billion yen 316 billion yen +45.0% Net Income 156 billion yen 229 billion yen +46.8% Forecast EPS 94.22 yen 138.31 yen +46.8%
What should be noted is that the growth in profit is greater than the growth in sales.
The upward revision rate for net sales is +17.6%. The upward revision rate for operating profit is +46.9%.
In other words, this is not just a simple increase in sales.
It is a revision where profit margins are significantly increasing due to high-value-added products, price increases, and improved product mix.
This is what investors are evaluating.
It is not 'we sold a lot,' but rather 'we sold at higher prices and profit margins also increased.'
The first-half revision is even stronger
This time, not only the full-year forecast but also the first-half forecast has been significantly revised.
Item Previous Forecast Revised Forecast Change Rate Net Sales 594 billion yen 778 billion yen +31.0% Operating Profit 92 billion yen 174 billion yen +89.1% Ordinary Profit 95 billion yen 177 billion yen +86.3% Net Income 67 billion yen 128 billion yen +91.0%
First-half operating profit has been revised from 92 billion yen to 174 billion yen.
That is nearly double.
This is quite significant.
This is because it is not a revision based on 'expectations for the second half,' but rather an indication that performance is already strong right now.
It is highly likely that orders, selling prices, and the easing of supply constraints are already impacting earnings.
This is the strength of this upward revision.
Why is Fujikura attracting attention in the AI data center space?
When people think of AI data centers, many think of NVIDIA's GPUs.
Of course, GPUs are central.
However, AI data centers do not run on GPUs alone.
It is necessary to connect a massive number of GPUs, servers, storage, and network equipment.
That is where optical fibers and optical components become important.
As AI models grow larger and communication traffic within data centers increases, infrastructure that can exchange data at high speeds and with low latency becomes essential.
In other words, the essence of AI infrastructure is not just GPUs.
Power, cooling, networking, and optical communications.
This entire peripheral infrastructure is becoming critical.
Within this, Fujikura is a stock attracting attention in the fields of optical fibers, optical cables, and optical components.
This upward revision is a manifestation of those expectations appearing in the numbers.
How should we view the stock price?
This upward revision also changes how we perceive the valuation.
The pre-revision forecast EPS was 94.22 yen.
The post-revision forecast EPS is 138.31 yen.
Because the EPS is rising significantly, the P/E ratio will appear lower even at the same stock price.
Assuming a stock price of 4,461 yen, the P/E ratio based on the post-revision EPS of 138.31 yen is approximately 32.3x.
Looking at it by stock price level, it breaks down as follows:
Stock Price Post-Revision EPS P/E Ratio 4,461 yen 138.31 yen approx. 32.3x 5,000 yen 138.31 yen approx. 36.2x 5,500 yen 138.31 yen approx. 39.8x 6,000 yen 138.31 yen approx. 43.4x 7,000 yen 138.31 yen approx. 50.6x
The important point here is not the simple argument that it is cheap because the P/E ratio is in the 32x range.
Fujikura is already valued as a high-growth stock.
Therefore, the current stock price already incorporates, to some extent, the continuation of AI data center demand, the expansion of optical fiber demand, and growth expectations for the next fiscal year and beyond.
If it is in the high 4,000 yen range, there is room to re-price the current upward revision.
On the other hand, once it exceeds 5,500 yen, it begins to incorporate not only the current fiscal year's upward revision but also the continuation of growth into the next fiscal year and beyond.
If it reaches the 6,000 yen range, it will be necessary to assume further upside to the medium-term management plan and the long-term continuation of AI infrastructure investment.
In other words, what is important from here on is,
not "buy because of the upward revision"
but rather,
"how many years of growth is the current stock price pricing in?"
.
Comparison with the Medium-Term Management Plan
The reason for the significant upward revision this time can also be understood by comparing it with the medium-term management plan.
Fujikura has set a target of 315 billion yen in operating profit for fiscal year 2028.
The revised operating profit forecast for the fiscal year ending March 2027 is 310 billion yen.
In other words, the company is coming very close to its medium-term management plan's operating profit target as of this fiscal year.
This is extremely significant for investors.
The market will think as follows:
"Might this company's medium-term plan be revised upward again?"
Fujikura has already significantly grown its earnings against the backdrop of expanding AI data center demand.
With this upward revision, the fiscal year 2028 target may start to look conservative.
This is the core of the stock's revaluation.
However, be cautious about chasing high prices.
There is no doubt that this is strong news.
However, one must also look at the risks when making investment decisions.
First, there is the fact that it is surging in PTS trading.
Stocks that release positive news after the market closes and rise sharply in after-hours trading can see a flood of buy orders at the opening of the next business day.
However, short-term traders may take profits after that.
This is the so-called 'opening high, closing low' risk.
Next is the high P/E ratio.
Even on a post-revision EPS basis, if the stock price is 5,500 yen, the P/E ratio is about 40x.
If it is 6,000 yen, it is about 43x.
This is a high level for a typical manufacturing company.
Of course, this can be justified if it is valued as a high-growth stock related to AI infrastructure.
However, for that to happen, growth must continue into the next fiscal year and beyond.
If the strength is only for this fiscal year and the growth rate slows down next year, the P/E ratio could be compressed.
Furthermore, the risk of hydrogen shortages has not completely disappeared.
The phrasing used this time refers to the mitigation of the impact.
It is not a complete resolution.
If demand remains strong and production increases continue, supply constraints and raw material cost issues will still need to be monitored going forward.
Investment Judgment
Here is my perspective.
Fujikura's upward revision this time is quite strong.
The company has provided a clear numerical answer to the points the market was skeptical about after the May earnings report.
In particular, the three points—orders for optical components for hyperscalers, price increases, and the mitigation of the impact of hydrogen shortages—significantly reinforce Fujikura's investment story.
Positive in the short term.
Room for reassessment in the medium term as well.
However, be cautious about jumping in to buy.
Organized by stock price level, my view is as follows.
Stock Price Level Investment Judgment High 4,000 yen range: Room for reassessment. Low 5,000 yen range: Level that largely prices in the upward revision. Over 5,500 yen: Cautious until the next earnings report is confirmed. Over 6,000 yen: Prices in growth continuing into the next fiscal year and beyond. Over 7,000 yen: Requires a premise of very strong long-term growth.
Personally, I view this upward revision as a 'trust recovery event'.
The collapse in May was not because AI demand itself had collapsed.
It was because the market was wary of the conservative nature of the company's plan and concerns over supply constraints.
This time, those concerns have receded significantly.
That is precisely why Fujikura has the potential to be reassessed once again.
However, if the stock price rises sharply all at once, the next battle will be against valuation.
Key points to watch in the next earnings report
The point to watch in the next earnings report is not revenue.
What is important is the profit margin and the quality of orders.
Specifically, these are as follows:
・Operating profit margin of the Information and Communication business
・Continuity of orders for hyperscalers
・Whether price increases are continuing
・Whether the impact of hydrogen shortages has resurfaced
・Whether the second-half plan is conservative
・Whether there is room for further upward revisions
・Whether inventory and accounts receivable are becoming too bloated
・Whether capital investment is leading to future growth
Particularly important is:
"Whether this upward revision is a one-time event or a structural change"
is.
This will be the biggest checkpoint for the next earnings report.
Final Conclusion
Fujikura's upward revision is not merely a correction of earnings forecasts.
It is an event where the company has provided a numerical answer to the strength of AI data center demand, which the market had been doubting.
Operating profit revised upward by +46.9%.
Hyperscaler projects.
Price increases.
Mitigation of hydrogen shortage impacts.
Early approach to the medium-term management plan.
Considering these factors, there is room for Fujikura to be re-evaluated.
However, be cautious about chasing high prices after the surge in PTS.
From here on, it is a phase to determine whether the stock price is pricing in only this fiscal year's upward revision, or if it is beginning to price in growth for the next fiscal year and beyond.
The one sentence investors should remember is this:
Fujikura's upward revision confirms the 'authenticity of AI demand,' but wait to see the quality of the next earnings report before chasing high prices.
